Transparency rules cause industry anger

The European Commission is seeking the mandatory disclosure by European energy, mining and forestry firms of payments to foreign governments, under legislation proposed on Tuesday (25 October).

The rules are part of revisions to the 2004 transparency directive, and are designed to curb corruption in asset-rich countries. The Commission’s proposed changes require the backing of national governments and MEPs.

Firms in the extractive industries oppose elements of the new rules, notably project-by-project reporting, which they say would lead to the disclosure of commercial secrets.

Companies in the sector had sought generous exemptions and fought against project-level reporting of fees, royalties and taxes – a battle they lost. They say that project-by-project reporting risks damaging the competitiveness of European firms, which would be subject to tougher rules than their counterparts from countries such as Brazil, China and India. They argue that transparency rules could also force them to break the law of the countries in which they operate.

A spokesperson for energy firm BP said: “We strongly believe in the goal of improving revenue transparency. We believe that the complexity of project-by-project reporting will add little and may prejudice the transparency of revenue flows to governments that can be achieved by country-by-country reporting.”

Loopholes

Transparency campaigners fear that there are too many loopholes in the proposed legislation. Its definition of a ‘project’ is broad, leaving it up to companies to make that decision, and does not require an independent audit of the information provided.

The transparency rules are part of broader legislation on corporate responsibility adopted on Tuesday and presented by Barnier, Antonio Tajani, the commissioner for industry and entrepreneurship, and László Andor, commissioner for employment, social affairs and inclusion.

The Commission also adopted a proposal to simplify accounting rules for small and medium-sized enterprises, and a strategy on corporate social responsibility.

Barnier said that the new rules would affect 200 listed and 400 unlisted extractive companies.

Diarmid O’Sullivan, Europe adviser at Global Witness, a pressure group, welcomed the proposal as a “strong foundation for good regulation”, although he said that the definition of what constitutes a project needed strengthening.

Paul de Clerck, from the European Coalition for Corporate Justice, another pressure group, was more critical. “The EU must put in place legislation that will hold European companies accountable for the damage caused by their subsidiaries or suppliers and they must take steps to make it easier for victims to go to a European court in case of abuses,” he said.